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Momo Announces Unaudited Financial Results for the Fourth Quarter and Fiscal Year 2017

BEIJING, March 7, 2018 /PRNewswire/ -- Momo Inc. (NASDAQ: MOMO) ("Momo" or the "Company"), a leading mobile social networking platform in China, today announced its unaudited financial results for the fourth quarter and the full year ended December 31, 2017.

Fourth Quarter 2017 Highlights

Net revenues increased 57% year over year to $386.4 million.

Net income attributable to Momo Inc. increased to $97.5 million in the fourth quarter of 2017 from $83.8 million in the same period last year.

Non-GAAP net income attributable to Momo Inc. (note 1) increased 20% to $110.0 million in the fourth quarter of 2017 from $91.5 million in the same period last year.

Diluted net income per American Depositary Share ("ADS") was $0.47, compared to $0.41 in the same period last year.

Non-GAAP diluted net income per ADS (note 1) was $0.53, compared to $0.44 in the same period last year.

Monthly Active Users ("MAU")[1] were 99.1 million in December 2017, compared to 81.1 million in December 2016

Full Year 2017 Highlights

Net revenues increased 138% year over year to $1,318.3 million for the full year of 2017.

Net income attributable to Momo Inc. was $318.6 million for the full year of 2017, compared with $145.3 million in 2016.

Non-GAAP net income attributable to Momo Inc. (note 1) was $368.2 million for the full year of 2017, compared with $177.0 million in 2016.

Diluted net income per ADS was $1.53 for the full year of 2017, compared with $0.71 in 2016.

Non-GAAP diluted net income per ADS (note 1) was $1.77 for the full year of 2017, compared with $0.87 in 2016.

"We had a good fourth quarter, capping off a remarkable year. I am happy to see the initiatives that we took in prior quarters started to bear early fruits." Commented Yan Tang, Chairman and CEO of Momo. "Net addition in MAU reaccelerated in the quarter with improving user retention and engagement. Such reacceleration shows the effectiveness of our product and content strategy as well as the improvement in the top of the funnel efficiency driven by our new marketing system. In addition, due to the initiatives that we have been taking since the fourth quarter, the content ecosystem around the live streaming service is seeing substantial development as we entered into the new year, providing a solid foundation for us to continue to drive content improvement and business growth for live streaming business going forward."

[1]MAU during a given calendar month is defined as Momo users who accessed the Momo platform through Momo mobile application and utilized any of the functions on the Momo platform for at least one day during the 30-day period counting back from the last day of such calendar month. The active users on Hani, the Company's stand-alone live video application, were not included in the MAU disclosed herein.

Fourth Quarter 2017 Financial Results

Net revenues

Total net revenues were $386.4 million in the fourth quarter of 2017, an increase of 57% from $246.1 million in the fourth quarter of 2016.

Live video service revenues continued its momentum and generated revenues of $328.0 million in the fourth quarter of 2017. The rapid growth in live video revenues was contributed by the increase in the quarterly paying users, which was 4.3 million for the fourth quarter of 2017, as well as, the increase in the average revenues per paying user per quarter.

Value-added service revenues mainly include membership subscription revenues and virtual gift revenues. The total value-added service revenues were $29.4 million in the fourth quarter of 2017, an increase of 54% from $19.1 million during the same period of 2016. The year over year increase was primarily driven by the increase in the number of paying users, and to a lesser extent, the increase in the average revenues per paying user per quarter with the result that we introduced more and more value-added services to our users to enrich communication experience among users. Total paying users of our value-added service were 5.0 million and 3.7 million as of December 31, 2017 and 2016, respectively.

Mobile marketing revenues were $21.8 million in the fourth quarter of 2017, an increase of 11% from $19.7 million during the same period of 2016. The growth in mobile marketing revenues was driven by the increased demand from brand marketers which was partially offset by the decrease of our advertisement inventories in the new version of Momo 8.0.

Mobile games revenues were $6.9 million in the fourth quarter of 2017, a decrease of 39% from $11.3 million in the fourth quarter of 2016. The decrease in game revenues was mainly due to the decrease in the quarterly paying users.

Cost and expenses

Cost and expenses were $293.3 million in the fourth quarter of 2017, an increase of 86% from $157.7 million in the fourth quarter of 2016. The increase was primarily attributable to: (a) an increase in revenue sharing with the broadcasters related to our live video service and virtual gift recipients; (b) an increase in marketing and promotional expenses to enhance our brand awareness, attract users and promote the live video service; (c) an increase in personnel related costs including share-based compensation expenses as a result of the Company's rapidly expanding talent pool; (d) increased infrastructure related spending, such as short messaging service charges, bandwidth costs and server depreciation costs, driven by more functions introduced on Momo's platform.

Non-GAAP cost and expenses (note 1) were $280.8 million in the fourth quarter of 2017, an increase of 87% from $150.0 million during the same period last year.

Income from operations

Income from operations was $107.1 million in the fourth quarter of 2017, compared to $88.4 million during the same period last year.

Non-GAAP income from operations (note 1) was $119.6 million in fourth quarter of 2017, compared to $96.1 million during the same period last year.

Income tax expenses

Income tax expenses were $19.0 million in the fourth quarter of 2017, increased from $3.2 million in the fourth quarter of 2016. The increase was mainly because we generated higher profit in the fourth quarter of 2017 and the tax holiday of one of our major profit generating entities changed from 100% exemption to 50% exemption of income tax.

Net income attributable to Momo Inc.

Net income attributable to Momo Inc. was $97.5 million in the fourth quarter of 2017, compared to $83.8 million during the same period last year.

Non-GAAP net income (note 1) attributable to Momo Inc. was $110.0 million in the fourth quarter of 2017, compared to $91.5 million during the same period last year.

Net income per ADS

Diluted net income per ADS was $0.47 in the fourth quarter of 2017, compared to $0.41 in the fourth quarter of 2016.

Non-GAAP diluted net income per ADS (note 1) was $0.53 in the fourth quarter of 2017, compared to $0.44 in the fourth quarter of 2016.

Cash and cash flow

As of December 31, 2017, Momo's cash, cash equivalents and term deposits totaled $1,059.6 million, compared to $651.3 million as of December 31, 2016. Net cash provided by operating activities in the fourth quarter of 2017 was $119.6 million, compared to $107.2 million for the same quarter of 2016.

Full Year 2017 Financial Results

Net revenues for the full year of 2017 were $1,318.3 million, an increase of 138% from $553.1 million in 2016, primarily driven by the significant increase in net revenues from live video service, value-added service, mobile marketing business.

Net income attributable to Momo Inc. was $318.6 million for the full year of 2017, compared to $145.3 million in 2016.

Non-GAAP net income attributable to Momo Inc. (note 1) was $368.2 million for the full year of 2017, compared to $177.0 million in 2016.

Diluted net income per ADS was $1.53 for the full year of 2017, compared to $0.71 in 2016.

Non-GAAP diluted net income per ADS (note 1) was $1.77 for the full year of 2017, compared to $0.87 in 2016.

Net cash provided by operating activities was $427.6 million during the full year of 2017, compared to $218.3 million in 2016.

Business Outlook

For the first quarter of 2018, the Company expects total net revenues to be between $387.0 million and $402.0 million, representing a year-over-year increase of 46% to 52%. These estimates reflect the Company's current and preliminary view, which is subject to change.

Note 1: Non-GAAP measures

To supplement our consolidated financial statements presented in accordance with U.S. generally accepted accounting principles ("GAAP"), we use various non-GAAP financial measures that are adjusted from the most comparable GAAP results to exclude share-based compensation.

Reconciliations of our non-GAAP financial measures to our U.S. GAAP financial measures are shown in tables at the end of this earnings release, which provide more details about the non-GAAP financial measures.

Our non-GAAP financial information is provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors' overall understanding of the historical and current financial performance of our continuing operations and our prospects for the future. Our non-GAAP financial information should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to the GAAP results. In addition, our calculation of the non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited.

Our non-GAAP information (including non-GAAP cost and operating expenses, income from operations, net income attributable to Momo Inc., and diluted earnings per ADS) is adjusted from the most comparable GAAP results to exclude share-based compensation. A limitation of using these non-GAAP financial measures is that share-based compensation charge has been and will continue to be for the foreseeable future a significant recurring expense in our results of operations. We compensate for these limitations by providing reconciliations of our non-GAAP measures to our U.S. GAAP measures. Please see the reconciliation tables at the end of this earnings release.

Conference Call

Momo's management will host an earnings conference call on Wednesday, March 7, 2018 at 8: 00 a.m. U.S. Eastern Time (9:00 p.m. Beijing / Hong Kong Time on March 7, 2018).

Dial-in details for the earnings conference call are as follows:

International:

+65 6713 5090

U.S. Toll Free:

+1 866 519 4004

Hong Kong Toll Free:

800-906601

Mainland China:

4006-208038

Passcode:

Momo

Please dial in 15 minutes before the call is scheduled to begin.

A telephone replay of the call will be available after the conclusion of the conference call through 8:00 a.m. U.S. Eastern Time, March 15, 2018. The dial-in details for the replay are as follows:

International:

+61-2-8199 0299

U.S. Toll Free:

+1 855 452 5696

Passcode:

8188118

Additionally, a live and archived webcast of the conference call will be available on the Investor Relations section of Momo's website at http://ir.immomo.com.

About Momo

Momo Inc. (Nasdaq: MOMO) is one of China's leading mobile social networking platforms. Momo enables users to establish and expand social relationships based on location and interests. Our platform includes our Momo mobile application and a variety of related features, functionalities, tools and services that we provide to users, customers and platform partners. We aim to offer our users an authentic social experience by encouraging them to provide detailed personal information on Momo. Leveraging our social interest graph engine and our analysis of user behavior data, we are able to provide users a customized experience based on their social preferences and needs. Momo users can maintain and strengthen their relationships through our private and group communication tools, content creation and sharing functions, recreational activities such as gaming, live and short video, as well as the offline social activities promoted on our platform. For more information, please visit http://ir.immomo.com.

This news release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include but are not limited to our management quotes and our financial outlook for the first quarter of 2018.

Our forward-looking statements are not historical facts but instead represent only our belief regarding expected results and events, many of which, by their nature, are inherently uncertain and outside of our control. Our actual results and other circumstances may differ, possibly materially, from the anticipated results and events indicated in these forward-looking statements. Announced results for the fourth quarter of 2017 are preliminary, unaudited and subject to audit adjustment. In addition, we may not meet our financial outlook for the first quarter of 2018 and may be unable to grow our business in the manner planned. We may also modify our strategy for growth. In addition, there are other risks and uncertainties that could cause our actual results to differ from what we currently anticipate, including those relating to our ability to retain and grow our user base, our ability to attract and retain sufficiently trained professionals to support our operations, and our ability to anticipate and develop new services and enhance existing services to meet the demand of our users or customers. For additional information on these and other important factors that could adversely affect our business, financial condition, results of operations, and prospects, please see our filings with the U.S. Securities and Exchange Commission.

All information provided in this press release and in the attachments is as of the date of the press release. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, after the date of this release, except as required by law. Such information speaks only as of the date of this release.

Momo Inc.

Unaudited Condensed Consolidated Statement of Operations

(US dollars in thousands, except per share data)

Three months

Year

ended December 31

ended December 31

2016

2017

2016

2017

Net revenues:

Live video service

194,840

327,995

376,925

1,102,592

Value-added service

19,067

29,380

67,603

103,139

Mobile marketing

19,730

21,830

66,339

76,178

Mobile games

11,299

6,891

35,453

35,619

Other services

1,182

260

6,778

743

Total net revenues

246,118

386,356

553,098

1,318,271

Cost and expenses:

Cost of revenues

(110,219)

(200,196)

(241,463)

(649,275)

Research and development

(7,733)

(18,760)

(31,399)

(51,491)

Sales and marketing

(28,395)

(56,622)

(97,173)

(217,437)

General and administrative

(11,357)

(17,711)

(38,983)

(62,581)

Total cost and expenses

(157,704)

(293,289)

(409,018)

(980,784)

Other operating (loss) income

(57)

14,008

406

23,379

Income from operations

88,357

107,075

144,486

360,866

Interest income

2,739

7,226

8,194

21,635

Impairment loss on long-term investments

(5,459)

-

(5,765)

(4,386)

Income before income tax and share of
income on equity method investments

85,637

114,301

146,915

378,115

Income tax expenses

(3,182)

(19,047)

(5,136)

(65,980)

Income before share of income on equity
method investments

82,455

95,254

141,779

312,135

Share of income on equity method investments

1,328

2,026

3,471

5,889

Net income

83,783

97,280

145,250

318,024

Less: net loss attributable to non-controlling interest

-

(227)

-

(542)

Net income attributable to Momo Inc.

83,783

97,507

145,250

318,566

Net income per share attributable to ordinary
shareholders

Basic

0.22

0.25

0.38

0.81

Diluted

0.20

0.23

0.36

0.77

Weighted average shares used in calculating
net income per ordinary share

Basic

388,567,606

397,753,884

377,335,923

394,549,323

Diluted

412,934,127

416,371,383

407,041,165

415,265,078

Momo Inc.

Unaudited Condensed Consolidated Statement of Comprehensive Income

(US dollars in thousands, except per share data)

Three months

Year

ended December 31

ended December 31

2016

2017

2016

2017

Net income

83,783

97,280

145,250

318,024

Other comprehensive (loss) income, net of tax of nil

Foreign currency translation adjustment

(8,337)

14,206

(11,642)

32,170

Comprehensive income

75,446

111,486

133,608

350,194

Less: comprehensive loss attributed to the non-
controlling interest

-

(172)

-

(494)

Comprehensive income attributable to Momo Inc.
shareholders

75,446

111,658

133,608

350,688

Momo Inc.

Unaudited Condensed Consolidated Balance Sheets

( US dollars in thousands)

December 31

December 31

2016

2017

Assets

Current assets

Cash and cash equivalents

257,564

685,827

Term deposits

393,759

373,794

Accounts receivable, net of allowance for doubtful
accounts of $nil and $90 as of December 31, 2016 and
2017, respectively

36,078

39,597

Prepaid expenses and other current assets

32,592

82,717

Deferred tax assets, current

72

-

Amount due from related parties

88

5,143

Short-term investment

-

1,614

Total current assets

720,153

1,188,692

Property and equipment, net

13,932

39,762

Intangible assets

-

7,462

Rental deposits

920

2,651

Long term investments

31,932

44,337

Deferred tax assets, non-current

208

7,197

Other non-current assets

2,593

8,495

Goodwill

-

3,401

Total assets

769,738

1,301,997

Liabilities and equity

Current liabilities

Accounts payable

40,457

74,535

Deferred revenue

41,277

64,865

Accrued expenses and other current liabilities

39,965

87,809

Amount due to related parties

8,117

5,804

Income tax payable

3,881

27,033

Total current liabilities

133,697

260,046

Deferred tax liabilities, non-current

-

1,866

Other non-current liabilities

2,022

2,305

Total liabilities

135,719

264,217

Shareholder's equity (Note a)

634,019

1,037,780

Total liabilities and shareholder's equity

769,738

1,301,997

Note a: As of December 31, 2017, the number of ordinary shares issued and outstanding was 398,425,309.

Momo Inc.

Unaudited Condensed Consolidated Statement of Cash Flows

(US dollars in thousands)

Three months

Year

ended December 31

ended December 31

2016

2017

2016

2017

Cash flows from operating activities:

Net income

83,783

97,280

145,250

318,024

Adjustments to reconcile net income to net cash provided by operating
activities: